Florida FHA Mortgage Information

Florida Mortgage applicants should understand the advantages of FHA home loans.

Q: What is a FHA mortgage?

A: A FHA mortgage is a form of insurance that makes buying a Florida home easier and less expensive then other type of Florida mortgage programs. The Federal Housing Administration does not lend money; private Florida lending organizations, such as banks, credit unions, or savings and loans, lend money. An endorsed FHA-approved mortgage is insured to the lender in case the homebuyer defaults on the loan.

Q: What are the advantages of a FHA mortgage?

A: There are many advantages of a FHA mortgage. Requires only a 3.5 percent down payment is required to secure a FHA mortgage. Unlike conventional Florida mortgages, the money for down payment does not have to be verified as the buyer's money; it can be a gift from a family member to the home purchaser from outside sources. In addition, the credit qualifications for a FHA mortgage are not credit score driven and less stringent than qualifications for conventional mortgages. Bankruptcy or foreclosure does not necessarily disqualify a borrower from approval as long as the borrower has re established credit history.

Q: Are FHA mortgage processes complicated?

A: FHA mortgage loans are No more complicated than conventional mortgage processes. FHA financing procedures have slimmed down in the past 20 years. In most cases, it is easier to qualify for a FHA mortgage than it is for a conventional mortgage.

Q: Who is eligible for a FHA mortgage?

A: Anyone who meets the credit, income, and employment requirements is eligible for a FHA mortgage. U.S. citizenship is not required to qualify for an FHA mortgage. The property secured with the mortgage must be the purchaser's primary residence. A social security card is necessary to qualify for a FHA mortgage.

Q: What is mortgage insurance, and how does it apply to FHA mortgages?

A: FHA Mortgage insurance is required to secure a FHA mortgage. Insurance money is collected by the lender (the bank, credit union, or savings and mortgage) and paid to the FHA fund. If a buyer defaults on the FHA insured mortgage, the money will be returned to the lender in the form of insurance against the default. FHA Mortgage insurance costs are typically 1.5 percent of the total mortgage. Private mortgage insurance may be required until 20 percent of the equity in the home has been paid.

Q: What are the different types of FHA mortgages?

A: Like conventional mortgages, there are several different types of FHA insured mortgages. A fixed-rate mortgage secures an interest rate at the time of purchase and remains constant for the life of the mortgage. There is also an adjustable-rate mortgage (ARM). The interest rate on an ARM fluctuates throughout the life of the mortgage, mirroring the current national index. There is also a graduated-payment mortgage (GPM), which requires a down payment and has negative amortization.

Q: What are the interest rates on FHA mortgages?

A: FHA mortgage interest rates are on par with the national average for conventional mortgages. FHA mortgage interest rates reflect current market conditions. A buyer may also use points when securing a FHA mortgage. "Points" lower the interest rate, and must be used as a down payment or financed through the mortgage.

Q: What are the expenses incurred with an FHA mortgage?

A: When purchasing a house with a FHA mortgage the buyer is responsible for the following: Down payment (usually no more than 3.5 percent), appraisal fee, escrow, mortgage origination fee (typically 1 percent of base mortgage amount), recording fees, credit report charges, title insurance policy fees, MMI impounds, hazard insurance and reserves, MIP (mortgage insurance, which can be financed), and property taxes.